Global Policy Forum

A drop in Iraqi oil exports could hurt ordinary Iraqis by draining money from the U.N. program that allows the sanctions-bound country to buy humanitarian supplies, Secretary-General Kofi Annan says. Iraq temporarily halted oil exports in December in a pricing dispute with the United Nations and has since only resumed modest exports. Annan said Tuesday that had led to a loss of $1.8 billion in oil revenues by the end of January.

Annan called on Baghdad to increase oil sales, saying there is no alternative to the oil-for-food program as long as sanctions remain in place. It is essential for Iraq and the Security Council ``now more than ever'' to stop inserting politics into the aid program. ``The Iraqi people must receive all the assistance that they direly need and deserve,'' Annan said.

On Wednesday, the New York Times reported that Iraqi officials have begun demanding kickbacks and illegal commissions from foreign companies seeking to sell humanitarian supplies in Iraq. The paper quoted unidentified diplomats and U.N. officials saying Iraqi officials required companies to pay bogus fees or hide commissions behind false prices for commodities such as wheat, sugar, rice or cooking oil. The money would then be deposited in foreign accounts for Iraq. Diplomats told the paper that some governments were investigating reports from companies that said they had refused Iraq's demands for kickbacks.

The 4-year-old oil-for-food program allows Iraq to sell oil, provided most of the money goes for food, medicine and other humanitarian supplies, and equipment to rebuild its frayed oil infrastructure. The report on kickbacks comes after accusations that Iraq was demanding that buyers of its crude pay a per-barrel surcharge directly into its coffers, in violation of sanctions. Industry analysts say Baghdad is still trying to force oil companies to pay the premium. As a result, buyers have stayed away.

The Security Council imposed the sanctions after Iraq's 1990 invasion of Kuwait. They sanctions cannot be lifted until U.N. inspectors declare that Iraq's nuclear, chemical and biological weapons have been destroyed. Inspectors who pulled out of Iraq in December 1998 ahead of U.S. and British airstrikes have since been barred by the Iraqi government from returning.

Last month, the United States and Britain targeted defense sites around Baghdad in another round of airstrikes, saying Iraq was improving its ability to track and target planes patrolling a ``no-fly zone'' imposed after the Gulf War. U.S. military officials accuse China of helping Iraq install fiber-optic communications cable at the defense sites in violation of U.N. sanctions, an allegation China has publicly denied. Chinese officials have admitted, however, that three Chinese telecommunications companies were working in Iraq, despite being ordered by Beijing to abide by the sanctions, The Wall Street Journal reported Wednesday, quoting a senior U.S. official. But they told U.S. Ambassador Joseph Prueher in Beijing on Monday that the companies were doing civilian work, not defense upgrades.

The reports come as the United States is proposing changes in the sanctions regime that would lift curbs on trade in consumer goods and focus on trying to plug leaks in a ban on weapons trade with Iraq. Annan, as well, met last week with Iraqi Foreign Minister Mohammed al-Sahhaf to discuss breaking the stalemate over sanctions and getting inspectors back into Iraq. In his quarterly report on the oil-for-food program, Annan said that while Iraq has been authorized to export unlimited amounts of oil and to import a wide range of goods to reduce malnutrition levels and improve the health of its people, its oil exports have dropped substantially. Saying he was ``very much concerned'' that the export drop will leave the humanitarian program without enough money, Annan urged the Iraqi government to increase its daily exports to its pre-December rates, ``given its proven capacity.''